1. Technical Field
The present invention relates, generally, to methods typically implemented as a suite of software applications designed to enable real-time financial planning and to drive the responsive allocation of financial resources.
2. Background Art and Technical Problems
Financial management and planning has been of crucial importance to business enterprises for many years. The success or failure of almost any significant business venture may depend upon the effectiveness of financial management and control measures. While the presence of effective financial planning and management processes will not guarantee the success of a business, the absence of such processes is a recipe for failure.
In the past, financial planning and management tools and procedures were unsatisfactory in that business conditions were not reflected in the financial plan or budget frequently enough. Changes in expense targets were not communicated in a timely manner. Budgets were submitted in multiple inconsistent formats. Budgets would not include all of the managers' inputs. The cumbersome roll-up of departments would involve long cycle times. It has been difficult for businesses to maintain earnings predictability, link operational decisions to financial objectives, and allocate resources efficiently.
In the past, financial planning has been performed using spreadsheet type methods, where various scenarios may be re-calculated with the aid of software programs, such as Microsoft Excel™. Typically, each manager or business unit would have to do its own independent spreadsheet calculation, based upon each individual's estimates and formulas. Sharing such data within an organization might be accomplished by attaching files to e-mail communications. There were no formal interactions between each software tool used at each level. Higher level managers would often be faced with submissions from a plurality of lower level managers in inconsistent formats, and the consolidation of lower level input into a high level financial plan would be cumbersome and time consuming. If resources had to be re-allocated to accomplish changes in a business plan or to respond to changes in conditions, no mechanism was available in the software to facilitate such re-allocations or the negotiation of such changes in the business plan. Such methods were less than completely satisfactory, because the financial planning process tended to be laborious and slow.
Prior art methods have been unsatisfactory because decision-making power in businesses has become increasingly decentralized, and such prior methods fail to incorporate input from line managers.
Current methods are unsatisfactory because they do not have an effective mechanism for incorporating and responding to new external data reflecting changes in the assumptions upon which a financial plan may be based. A financial plan may be based upon certain assumptions concerning projected sales, market size, business conditions, and other external data. Often, financial management systems do not quickly respond to changes in such assumptions until the end of the current planning period, when actual results may be compared to the previous estimates. Businesses that do not have financial planning systems capable of real-time response to such events may only find out too late in a quickly changing market that resources has been allocated in a less than optimum fashion, that business opportunities have been missed, and that financial performance has been diminished by undue delay in implementing an effective response to a change in market conditions.
Modern businesses more and more have to respond to rapid changes in the business environment. The need for a financial management system that enables real-time planning and market-responsive allocation of resources has grown in recent years. There is a need for a financial management system that is capable of transforming the planning process into an efficient method of steering the organization, by linking critical external information directly to company decision-making activities. More effective financial management systems would allow a business to better align resources to capitalize upon opportunities or minimize the impact of downturns or adverse conditions. There is a need for financial management and control tools that allow an organization to rapidly (on weekly or monthly frequencies, for example) realign financial resources throughout the organization in response to changing market and business conditions.
There is also a need for financial planning tools that facilitate the negotiation of changes in the allocation of resources. A lower level manager needs a mechanism built into the financial planning software for requesting an increase in the manager's budget when circumstances so dictate. In the past, such negotiations had to be conducted off-line, and software tools for financial planning had no mechanism to facilitate the process.
In recent years, the growth of the Internet has offered a new tool for communication and networking of software tools. There is a growing need to have software financial planning tools that take advantage of the Internet. Organizations spread over geographically diverse locations need financial planning tools that integrate seamlessly and facilitate financial management and control throughout the organization regardless of geographical location or distance. In addition, in the past it has been typical to implement software tools that require each individual user to install and maintain application software on each individual's computer. Updates and maintenance of such software tools in a large organization may present formidable obstacles. The is a need for software financial planning tools that take advantage of the Internet and which provide access to remotely hosted applications securely and reliably from anywhere in the world using a standard Internet browser.
While effective financial planning and management tools and processes have long been recognized as important to the success of business enterprises, efforts in the past to implement effective financial planning and management controls and procedures have not been altogether satisfactory. There is a significant need for improved methods and procedures for financial planning and control that are capable of real-time response to changing market conditions and which overcome some of the problems with the prior art methods and procedures.